Microcredit makes women poor

The latest manifestation of the ability of our bosses, sorry development partners to absorb and seemingly respond to criticism in ways that renders it meaningless, is the rehabilitation of microcredit as a strategy to address women’s absolute and relative poverty.
At the global level, Mohammed Yunus of Bangladesh wins a Nobel Prize. And everyone bends over backwards to accommodate the Grameen Bank model—providing small loans to women for entrepreneurial activities at the basic level.

The Grameen Bank experience clearly showed that women tend to have higher repayment (and entrepreneurial success) rates than men. And because of the difficulties of accessing credit otherwise, women are also more prone to accept the higher interest and transaction costs generally associated with microcredit. Meaning that the Grameen model can be adapted to make money off women.

Here in Kenya, the retreat of the multilateral banks from much of the country during the 1990s together with the collapse of many local banks meant that a void was clearly there to be filled. In stepped new entrants like Equity Bank — who have, in fact, offered clearly necessary and valuable services to Kenyans left out of the credit sphere. I am not oblivious to that fact and I think that examples like that provided by Equity Bank deserve recognition and support — as well as analysis of their impact on the lives of such Kenyans.

What I am objecting to, however, is the dishing out of easy answers to complex questions. The government of Kenya’s new women’s fund for instance. The new injection of funds by the international financial institutions into Equity Bank to enable the roll-out of microcredit to women. The assumption that efforts like these are sufficient to move women out of poverty.

RETURNING TO THE GRAMEEN Bank example, it is obvious that the provision of microcredit to women can enable individual women to improve their livelihoods —but only when also provided not just with small loans but also a host of related support. It is equally obvious, however, that microcredit alone is insufficient to change the livelihood possibilities of women collectively.

Because microcredit is essentially used for small entrepreneurial activities within the context that its women beneficiaries live in, it essentially enables a redistribution of sorts among the poor, rather than redistribution in a broader sense. In fact, when not clearly based on principles like the Grameen Bank’s, it can contribute (because of the higher interest and transaction rates associated with commercial microcredit schemes) to further impoverishment of the poor — and more distribution from the poor to the rich.

So far, however, all we’ve seen in terms of responses to the new women’s fund are generally congratulatory messages. With some rumblings of discontent about how it will be disbursed—in consultation with which women’s networks and through what modalities. And some more rumblings of discontent about the amounts proposed for the fund overall.

What we haven’t seen is a concerted effort to ensure that it truly will work for at least the individual women it will serve — which needs to be done with the Kenyan financial institutions with a long history in reaching individual women this way, like the Kenyan Women’s Finance Trust. Neither have we seen a concerted effort to seize the moment to pose more fundamental questions and propose more fundamental strategies about how to address women’s collective impoverishment.

Where are our feminist (not just female) economists and activists in this field? It’s time to stand up to be heard.